Fears of triple-dip eurozone recession as Germany cuts growth forecasts

Anti-austerity movement gains confidence as largest economy suffers from falling industrial output and geopolitical crises

Germany has slashed its growth forecasts for this year and 2015, sparking calls for a public spending boost to prevent the eurozone falling into a triple-dip recession.

Berlin now expects growth of just 1.2% this year and the same in 2015, it said on Tuesday, down from 1.8% and 2%, in the face of slowing export growth.

It came as official Eurostat figures showed that industrial production across the eurozone slumped in August by an alarming 1.8% month-on-month, meaning it was 1.9% lower than a year ago.

France rebels against austerity as Europe’s recovery collapses

France’s finance minister sends tremors through European capitals with a defiant warning that his country would no longer try to meet deficit targets

Eurozone strategy is in tatters after economic recovery ground to a halt across the region and France demanded a radical shift in policy, warning that austerity overkill is driving Europe into a depression.

Growth slumped to zero in the second quarter, with Germany contracting by 0.2pc and France once again stuck at zero. Italy is already in a triple-dip recession.

Yields on 10-year German Bunds fell below 1pc for the first time in history, beneath levels seen during the most extreme episodes of deflation in the 19th century. French yields also touch record lows. Much of the eurozone is replicating the pattern seen in Japan as it slid into a deflation trap in the late 1990s.

It is unclear whether tumbling yields are primarily a warning signal of stagnation ahead or a bet by investors that the European Central Bank will soon be forced to launch quantitative easing, buying government bonds across the board.